Hell on Earth

Jared Dillian | The 10th Man
March 10, 2022

Let me look into my crystal ball for a second and try to see what the world will be like in 2030.

• Gasoline is $20/gallon

• Crack is free

• 10-year prison sentences for possession of tobacco

• Stores have disappeared due to shoplifting

• Amazon (AMZN) has a $6 trillion market cap

• A lack of liquidity has made it impossible to trade stocks

• The top federal tax rate is 62%

• The top state tax rate is 23%

• A CFA is required to work on Wall Street

• Rob Manfred is still the baseball commissioner

• Average attendance at a baseball game is 2,500

• There is a social credit system and a digital dollar

• Interest rates are -6%

• Official inflation is 8%, but the true estimate is 25%

I can do the dystopian game all day long. So can you. We are all pessimists. Hell, last week we thought we were all going to get nuked. We still might, which is a good reason to come to my party (see below).

It’s darkest before the dawn. I don’t think gasoline will reach $20/gallon. But I have said in the past that high commodity prices only happen under certain circumstances—when the authorities screw things up. Boy oh boy. This ESG thing opened a big can of worms. Literally wrecked the economy. This is what happens when you screw around with the profit motive.

Biden’s intransigence on this issue is just shocking. Even Elon Musk, who owns a smallish electric car company, thinks we should increase oil and gas production in the short term. You have Pete Buttigieg telling average Americans with an income of $50,000 a year to go buy a $60,000 electric car. Crazy town we’re living in.

But this too shall pass. Commodity prices will come down over time. Because people are smart and figure things out… or they don’t.

In the Neighborhood

One theme I have been harping on in my newsletters is that commodities tend to make V tops, and stocks tend to make V bottoms. But when stocks top, they make big, rounded U tops, and when commodities bottom, they make big, rounded U bottoms (the oil bottom in 2020 is the exception, where prices went negative).

We’re seeing a lot of V tops in commodities, and correspondingly, we’re going to see a V bottom in stocks. I think it happened yesterday. Or thereabouts. We’re in the neighborhood. At last, it is time to dip a toe and buy tech and growth, which have had one hell of a bear market over the last year. It doesn’t matter that the Nasdaq only went down 20%. The average stock went down a lot more.

I don’t have any good reason to believe things will get better. Things have been getting worse for a while. But the charts will tell you that things are changing long before sentiment does. I was chatting with one of my subscribers yesterday, and he talked about how he was making client visits with a famed technical analyst, and this analyst was telling people that gold was acting better, but he couldn’t figure out why. This was August 2001.

The charts always tell the story. And in the last few weeks, I have turned into an ardent chart-reader, trying to find the turning point for this market. Although you didn’t really need the charts—that blow-off top in nickel pretty much told the story. They usually ring a bell at the top. Not to say that commodities couldn’t go up for the next 5–10 years, because they always could. But then you hear stories about the wheat ETF that got so clogged up with assets that it couldn’t create new shares. Not the type of stuff you usually see at bottoms.

Even gold. I’ve written about gold twice in the last month, and gold has to take a break here. It gapped up to $2,060, pretty close to the previous highs, and then it collapsed. It will take a few weeks or months to consolidate before making another push higher. I’m not going to say the easy money has been made, because there will be more easy money, but the straight shot from $1,820 to $2,060 is pretty much over.

I’ve seen echoes of this before, the big commodity bull run that lasted until early 2008. But there was no war and no panic like we have today. It simply collapsed under its own weight, as a precursor to the financial crisis. But back then, you had way more speculation in commodities than you have today—institutional investors were buying those dang commodity index swaps. I get the impression we don’t have that level of speculation today, even if you include the knuckleheads piling into this or that commodity ETF.

History may not repeat itself, but it rhymes.

Party

So, like I said earlier, we’re all going to die, so it’s a good time to go to a party. Come see me and my friends at Doux Supper Club, 59 W. 21st St., on Friday April 1, 7 pm–12 am. There may even be partial nudity (though probably not by me). Click here for tickets.

Jared Dillian

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